Speech BM IBI Seminar 261009
Keynot e Speech
1
M ANAGING RISK IN THE NEW LANDSCAPE
BUDI M ULYA
Deputy Governor of Bank Indonesia
Chairman, Board members and members of t he Indonesian Bankers Associat ion and
Banker Associat ion and Risk M anagement , Dist inguished Speakers, Ladies and Gent lemen,
It is such a great honored t o be here t oday, especially t o join in a dialog amongst
expert s and pract it ioners, on risk management . The risk management t opic, has become
import ant subject t o be seriously addressed, considering on w hat w e have observed during
t he most recent global financial crisis.
The impact of t he crisis t hat emerged back in Sept ember 2008, has spread deeply and
w idely t hrough, bot h financial market and real economic, in part icular passing t hrough
int ernat ional t rade channel. Since t hen, w e all have w it nessed t hat over t he past year,
t here has been dramat ic change, in many aspect s of t he economy and financial market
globally. The magnit ude impact of t he crisis int o individual count ry differs, depending on
how , and t o w hat ext ent t he economy of individual count ry, and it s financial inst it ut ions is
linked int o t he global market . Yet , t here is no single count ry immune from t he recent
t urbulence. This is most ly because at t he first st age t he financial t urmoil w hich st art ed in
t he US financial market has t riggered panic amongst financial market players, in face w it h
high uncert aint y, and t his behavior w as spreading almost inst ant ly w orldw ide.
To t hat respect I w ould like t o emphasize, t hat such market behavior has much t o do
w it h risk management , more specifically in t he w eakness, of it s implement at ion in t he real
w orld. Thus, t he recent crisis show s somew hat in cont rast of t he fact t hat during t he last
decade risk management has become one import ant t opic in discussion. As a management
t ool, t he pract ice of risk management so far, has failed t o change human being behavior
t hat t ends t o be easily t rapped in complacency. That is, a t endency of not assessing risk
properly in good t ime, part ly covered by expect ed high ret urn, but t hen react ing so
ext remely in reverse w hen t hing goes in t he opposit e direct ion.
How ever, as w e observed from t he ongoing public debat e w it h regard t o t he cause of
t he recent t urmoil, t he similar phenomenon can be found w it hin t he aut horit y’s or
regulat or’s perspect ive. In part icular, on how t hey perceived risk in set t ing policy and in
regulat ing financial indust ry. M ore specifically on t he assumpt ion t hat market discipline
w ill alw ays w ork properly.
1
Address at Banker Associat ion for Risk M anagement (BARa) seminar on ‘M anaging Risks in Uncert ain World” ,
Jakart a, 26 Oct ober 2009.
1
One high light t hat w e can derive from w hat has been happening so far, is t hat t he
financial indust ry must alw ays be closely linked w it h t he real sect or act ivit ies, t he
fundament al economic.
The Indonesian economy and financial industry during turmoil
As in some emerging economies, Indonesia essent ially has quit e a st rong
fundament al, and much bet t er compare t o w hat w as during 1997/ 98 Asian crisis.
How ever, as I previously ment ioned t he crises t hat caused global economic grow t h slump
and t he int ernat ional t rade volume squeeze, as w ell as high degree of uncert aint y t hat
surrounded t he int ernat ional financial market has also w eakened t he domest ic economic
act ivit ies. Yet , t he economy is st ill able t o expand. The Indonesia’s economy grew at 6.1%
in 2008. The Indonesian economic grow t h reached t he bot t om in quart er II 2009 at 4%, a
0.4% drop from previous quart er of 4.4%. We expect t hat t he Indonesian economy w ill
grow at 4.0 t o 4.5% in 2009, higher t han previously est imat ed. The domest ic economic
grow t h is mainly support ed by domest ic demand w hich cont ribut e more t han 60% of GDP
and nat ural resources export . In 2010, w e expect t he economy w ill grow at 5% t o 5.5%.
Along w it h declining domest ic economic act ivit ies in 2009, inflat ion rat e has also
descended. As of Sept ember 2009, t he year t o dat e inflat ion rat e is 2.28%. Inflat ion is
expect ed back t o it s normal pat t ern in 2010 at 5 +/ -1 % as economic act ivit ies st art
accelerat ing.
In addit ion, t he domest ic banking indust ry is also in relat ively sound condit ion and
w ell capit alized. The average capit al adequacy rat io (CAR) is around 17% and t he gross
non-performing loan (NPL) rat io is below 5%.
Those fact s show t hat t he Indonesian economy is relat ively shelt ered from t he
biggest t urbulence since t he w orld’s w ar II. How ever, foreign invest ors t end t o undermine
t hose fact s, and perceived risks exaggerat edly on t he Indonesian economic fundament al.
Despit e t hat , it w as t rue t hat t he crisis caused panic and lost of confidence, in part icular
post Lehman Brot hers collapsed in 15 Sept ember 2008, w hich led t o t he phenomenon of
holding cash alike and safe haven asset s, it has put significant pressure on Indonesian
economy and increasing volat ilit y in t he domest ic financial market . Risk percept ion on t he
Indonesian financial market has been so high as show n in t he hike of CDS spread, t hat
reach a peak of around 1000 bps in Oct ober 2008, t he highest spread amongst count ries
w it hin t he region. Furt her, t he exodus from emerging market financial asset s, led t he
government bond (SUN) price index (IDM A index) t o fall t o it s low est level ever at 67.11 in
Oct ober 2008, w hich mean t hat across t he board yield of SUN, has hike t o above 15%. The
IDR exchange rat e again US Dollar, has also w eakened dramat ically from around 9.200
levels, t o reach it s peak at 12.000 levels in November 2008.
How ever, t he above sympt oms of increasing count erpart y and credit risk also could
be observed in domest ic market . The int er-bank money market indicat ors also revealed
similar shape, t o t hose found in global market during t he crisis. The spread of JIBOR 1
mont h over BI Rat e for inst ance, has w idened significant ly t o around 250 bps, despit e t hat
t he int erest rat e w as in declining t rend, w hile in normal condit ion it is alw ays below 50
2
bps. Furt her, t here w as also a t endency t hat banks prefer t o hold t heir reserve, in short er
mat urit y of Bank Indonesia’s OM O inst rument s (FASBI and short -t erm deposit collect ion,
t he so-called FTK). These, along w it h nervous as observed in t he banking indust ry w it h
regard t o it s funding source, public or t hird part ies deposit t hat led t o unhealt hy
compet it ion amongst banks, has show ed t hat , t here w as some liquidit y risk concern in t he
domest ic banking sect or.
To cope w it h t he above ment ion sit uat ion, Government and Bank Indonesia t ook
some necessary measures t o safeguard t he domest ic economy. Government has provided
fiscal st imulus t o secure t he real sect or act ivit ies, as w ell as t o prevent t he det eriorat ion
purchasing pow er of t he poor. M eanw hile, t he monet ary policy st imulus, t ook form in
accommodat ive st ance, as inflat ion has fallen, by reducing BI Rat e 300 bps since November
2008, from 9.5% t o 6.5%. In addit ion, from t he operat ional level, Bank Indonesia has also
undert aken some measures aimed at addressing market liquidit y concern, by providing
and ensuring t he supply of liquidit y in cash money market , bot h in US Dollar and in Rupiah.
In US Dollar market , Bank Indonesia reduced t he required reserve rat io, from 3% t o
1%, lengt hening t he mat urit y of sw ap operat ion, and ensuring t he US Dollar liquidit y need
for domest ic corporat ions via banks, by providing w indow for rediscount ing export
underlying inst rument . M eanw hile, in t he rupiah money market , Bank Indonesia t ook
similar measure, such as providing w indow for ‘repo’ t ransact ion, using underlying asset s
of government bonds, and cert ificat e of Bank Indonesia (‘SBI’), for various mat urit y,
recent ly up t o 3 mont hs, t hrough auct ion mechanism. The auct ion mechanism is also
aimed at avert ing, t he negat ive ‘st igma’ from banks’ perspect ive in dealing w it h t he cent ral
bank t o obt ain t emporary liquidit y in fair market price.
All t hose measures, w hich in essence is similar t o t hose t aken by major aut horit ies
globally, even t hough differ in scale and inst rument variet y, has so help t he Indonesian
economy and financial sect or, in passing by t he most challenging episode during t he crisis.
Along w it h improvement in global economy and financial market , t hose indicat ors have
move back t o t heir more normal level. The spread of JIBOR 1 mont h over BI Rat e, for
inst ance, has decline significant ly at around 15 bps. Yield of SUN has declined t o 10%-11%
for t he 10 years SUN and longer mat urit y. The CDS spread has also dropped t o below crisis
level of below 200 bps, close t o t he pre crisis level. M eanw hile, t he IDR exchange rat e has
also recovered and hover around 9,400 recent ly, despit e st ill at higher volat ilit y compare
t o t he pre crisis period.
How ever, t he policy t ransmission int o t he real sect or has been slow ing dow n as
uncert aint ies remain. The banks’ lending, needed t o support t he economic grow t h, is st ill
quit e slow . The year t o dat e banks’ lending grow t h up t o Sept ember 2009 is st ill below 5%.
In addit ion, t he lending rat e also does not decline as expect ed. Despit e t hat , t his is
sensible, in face w it h t he declining economic slow dow n and uncert aint y, but is also closely
linked w it h t he w ay banking implement risk management . For some ext ent , t his reflect s,
t hat t hey t end t o avoid risk rat her t han, properly ident ifying and manage risk accordingly.
We also observe t hat t he w ay financial invest ors globally, do not show any change in
t heir behavior, as mainly reflect ed in t he high volat ilit y of st ock market . They t end t o over
3
react on every single new s and dat a announcement , w hich indicat es t heir eagerness, t o t ry
t o recover t heir lost during t he crisis, and nervousness of pot ent ial lost . This behavior, is
pot ent ially t hreat ening t he sust aining economic recovery.
The risks and challenge ahead
There are now more signs of global economic recovery and improvement in t he
prospect of financial market . How ever it is st ill t oo early t o conclude, t hat t he recovery
pat h w ill be smoot h and sust ainable, since as I previously ment ion, t he lag of policy
t ransmission t end t o lengt hen and uncert aint y remains. In addit ion, issues concerning t he
implicat ion of ext raordinary measures, t hat has been t aken by major aut horit ies, such as
t he w idening of fiscal deficit in major count ries, and t he ‘exit policy’ of quant it at ive easing
t aken t o fight deflat ionary pressure in t hose count ries has st art ed t o emerge. To cope w it h
t his issue, aut horit ies have int ensified t heir policy communicat ion, t o convince t hat all
needed measures and t ools have been prepared. Yet , it seems t hat all of t hose are not
convincing enough, as at t his st age, t he polit ical involvement in every count ry t ends t o
increase.
Wit h t he above background, w e have t o keep opt imist , but st ill have t o be caut ious.
From t he risk management perspect ive, t he challenge in t he period ahead, is in ident ifying
t he pot ent ial risk appropriat ely, w hich is t he key in risk management . The recent
t urbulence has changed t he global economy and financial market landscape. Consequent ly
t he st andard indicat ors, bot h in financial market and real economic, might have also
changed, and w e cannot rely on t heir empirical behavior. In face w it h t his sit uat ion, w e all
have t o w iden t he indicat ors t o be considered, including qualit at ive indicat ors.
The recent development has also lead t he aut horit y, t o adjust and shift t heir
paradigm and approach in set t ing t he macroeconomic policy, and supervising as w ell as
regulat ing financial sect or. In addit ion, aut horit ies globally have been challenged, w it h a
more serious dilemma. On one side, t heir need t o maint ain sust ainable economic recovery
process, w hich means need t o be expansionary or accommodat ive. While on t he ot her
side, t hey need t o maint ain financial syst em st abilit y, mainly by st rengt hening regulat ion
and supervision and improve t he balance sheet st ruct ure of financial indust ry, banking in
part icular, and it s risk management as w ell as t o avoid t he pot ent ial inflat ion in t he
medium t o long t erm horizon. St riking t he opt imal balance bet w een t hese t w o sit uat ions
w ill be challenging and dynamic.
The sit uat ion w e have in Indonesia is considerably bet t er t han t hose faced by
developed count ries, but w e have t o alw ays be aw are, t hat w e are in an int egrat ed w orld,
and t hat t here is st ruct ural changes. Hence, more prone t o ext ernal shock. In t his regard,
Bank Indonesia alw ays commit , in achieving a balance bet w een financial st abilit y and
monet ary st abilit y, in order t o maint ain low and st able inflat ion needed t o safeguard a
healt hier and sust ainable economic grow t h.
The sit uat ion I just described, should alw ays be t aken int o account in conduct ing
business in a more challenging period ahead, more specifically in t he risk management
4
pract ice. For banking indust ries, considering t heir import ant role in t he economy, and t he
severe impact in t he societ y w hen t hey fail, I hope t here w ill be more professional, and
more proper implement at ion of risk management , and in part icular a more efficient asset
and liabilit ies management .
From t oday’s seminar, I hope w e w ill have a bet t er insight in risk management area
and a fruit ful discussion t o enhance our underst anding and more import ant ly t o increase
confidence in implement ing it .
THANK YOU.
Jakart a, 26 Oct ober 2009
5
1
M ANAGING RISK IN THE NEW LANDSCAPE
BUDI M ULYA
Deputy Governor of Bank Indonesia
Chairman, Board members and members of t he Indonesian Bankers Associat ion and
Banker Associat ion and Risk M anagement , Dist inguished Speakers, Ladies and Gent lemen,
It is such a great honored t o be here t oday, especially t o join in a dialog amongst
expert s and pract it ioners, on risk management . The risk management t opic, has become
import ant subject t o be seriously addressed, considering on w hat w e have observed during
t he most recent global financial crisis.
The impact of t he crisis t hat emerged back in Sept ember 2008, has spread deeply and
w idely t hrough, bot h financial market and real economic, in part icular passing t hrough
int ernat ional t rade channel. Since t hen, w e all have w it nessed t hat over t he past year,
t here has been dramat ic change, in many aspect s of t he economy and financial market
globally. The magnit ude impact of t he crisis int o individual count ry differs, depending on
how , and t o w hat ext ent t he economy of individual count ry, and it s financial inst it ut ions is
linked int o t he global market . Yet , t here is no single count ry immune from t he recent
t urbulence. This is most ly because at t he first st age t he financial t urmoil w hich st art ed in
t he US financial market has t riggered panic amongst financial market players, in face w it h
high uncert aint y, and t his behavior w as spreading almost inst ant ly w orldw ide.
To t hat respect I w ould like t o emphasize, t hat such market behavior has much t o do
w it h risk management , more specifically in t he w eakness, of it s implement at ion in t he real
w orld. Thus, t he recent crisis show s somew hat in cont rast of t he fact t hat during t he last
decade risk management has become one import ant t opic in discussion. As a management
t ool, t he pract ice of risk management so far, has failed t o change human being behavior
t hat t ends t o be easily t rapped in complacency. That is, a t endency of not assessing risk
properly in good t ime, part ly covered by expect ed high ret urn, but t hen react ing so
ext remely in reverse w hen t hing goes in t he opposit e direct ion.
How ever, as w e observed from t he ongoing public debat e w it h regard t o t he cause of
t he recent t urmoil, t he similar phenomenon can be found w it hin t he aut horit y’s or
regulat or’s perspect ive. In part icular, on how t hey perceived risk in set t ing policy and in
regulat ing financial indust ry. M ore specifically on t he assumpt ion t hat market discipline
w ill alw ays w ork properly.
1
Address at Banker Associat ion for Risk M anagement (BARa) seminar on ‘M anaging Risks in Uncert ain World” ,
Jakart a, 26 Oct ober 2009.
1
One high light t hat w e can derive from w hat has been happening so far, is t hat t he
financial indust ry must alw ays be closely linked w it h t he real sect or act ivit ies, t he
fundament al economic.
The Indonesian economy and financial industry during turmoil
As in some emerging economies, Indonesia essent ially has quit e a st rong
fundament al, and much bet t er compare t o w hat w as during 1997/ 98 Asian crisis.
How ever, as I previously ment ioned t he crises t hat caused global economic grow t h slump
and t he int ernat ional t rade volume squeeze, as w ell as high degree of uncert aint y t hat
surrounded t he int ernat ional financial market has also w eakened t he domest ic economic
act ivit ies. Yet , t he economy is st ill able t o expand. The Indonesia’s economy grew at 6.1%
in 2008. The Indonesian economic grow t h reached t he bot t om in quart er II 2009 at 4%, a
0.4% drop from previous quart er of 4.4%. We expect t hat t he Indonesian economy w ill
grow at 4.0 t o 4.5% in 2009, higher t han previously est imat ed. The domest ic economic
grow t h is mainly support ed by domest ic demand w hich cont ribut e more t han 60% of GDP
and nat ural resources export . In 2010, w e expect t he economy w ill grow at 5% t o 5.5%.
Along w it h declining domest ic economic act ivit ies in 2009, inflat ion rat e has also
descended. As of Sept ember 2009, t he year t o dat e inflat ion rat e is 2.28%. Inflat ion is
expect ed back t o it s normal pat t ern in 2010 at 5 +/ -1 % as economic act ivit ies st art
accelerat ing.
In addit ion, t he domest ic banking indust ry is also in relat ively sound condit ion and
w ell capit alized. The average capit al adequacy rat io (CAR) is around 17% and t he gross
non-performing loan (NPL) rat io is below 5%.
Those fact s show t hat t he Indonesian economy is relat ively shelt ered from t he
biggest t urbulence since t he w orld’s w ar II. How ever, foreign invest ors t end t o undermine
t hose fact s, and perceived risks exaggerat edly on t he Indonesian economic fundament al.
Despit e t hat , it w as t rue t hat t he crisis caused panic and lost of confidence, in part icular
post Lehman Brot hers collapsed in 15 Sept ember 2008, w hich led t o t he phenomenon of
holding cash alike and safe haven asset s, it has put significant pressure on Indonesian
economy and increasing volat ilit y in t he domest ic financial market . Risk percept ion on t he
Indonesian financial market has been so high as show n in t he hike of CDS spread, t hat
reach a peak of around 1000 bps in Oct ober 2008, t he highest spread amongst count ries
w it hin t he region. Furt her, t he exodus from emerging market financial asset s, led t he
government bond (SUN) price index (IDM A index) t o fall t o it s low est level ever at 67.11 in
Oct ober 2008, w hich mean t hat across t he board yield of SUN, has hike t o above 15%. The
IDR exchange rat e again US Dollar, has also w eakened dramat ically from around 9.200
levels, t o reach it s peak at 12.000 levels in November 2008.
How ever, t he above sympt oms of increasing count erpart y and credit risk also could
be observed in domest ic market . The int er-bank money market indicat ors also revealed
similar shape, t o t hose found in global market during t he crisis. The spread of JIBOR 1
mont h over BI Rat e for inst ance, has w idened significant ly t o around 250 bps, despit e t hat
t he int erest rat e w as in declining t rend, w hile in normal condit ion it is alw ays below 50
2
bps. Furt her, t here w as also a t endency t hat banks prefer t o hold t heir reserve, in short er
mat urit y of Bank Indonesia’s OM O inst rument s (FASBI and short -t erm deposit collect ion,
t he so-called FTK). These, along w it h nervous as observed in t he banking indust ry w it h
regard t o it s funding source, public or t hird part ies deposit t hat led t o unhealt hy
compet it ion amongst banks, has show ed t hat , t here w as some liquidit y risk concern in t he
domest ic banking sect or.
To cope w it h t he above ment ion sit uat ion, Government and Bank Indonesia t ook
some necessary measures t o safeguard t he domest ic economy. Government has provided
fiscal st imulus t o secure t he real sect or act ivit ies, as w ell as t o prevent t he det eriorat ion
purchasing pow er of t he poor. M eanw hile, t he monet ary policy st imulus, t ook form in
accommodat ive st ance, as inflat ion has fallen, by reducing BI Rat e 300 bps since November
2008, from 9.5% t o 6.5%. In addit ion, from t he operat ional level, Bank Indonesia has also
undert aken some measures aimed at addressing market liquidit y concern, by providing
and ensuring t he supply of liquidit y in cash money market , bot h in US Dollar and in Rupiah.
In US Dollar market , Bank Indonesia reduced t he required reserve rat io, from 3% t o
1%, lengt hening t he mat urit y of sw ap operat ion, and ensuring t he US Dollar liquidit y need
for domest ic corporat ions via banks, by providing w indow for rediscount ing export
underlying inst rument . M eanw hile, in t he rupiah money market , Bank Indonesia t ook
similar measure, such as providing w indow for ‘repo’ t ransact ion, using underlying asset s
of government bonds, and cert ificat e of Bank Indonesia (‘SBI’), for various mat urit y,
recent ly up t o 3 mont hs, t hrough auct ion mechanism. The auct ion mechanism is also
aimed at avert ing, t he negat ive ‘st igma’ from banks’ perspect ive in dealing w it h t he cent ral
bank t o obt ain t emporary liquidit y in fair market price.
All t hose measures, w hich in essence is similar t o t hose t aken by major aut horit ies
globally, even t hough differ in scale and inst rument variet y, has so help t he Indonesian
economy and financial sect or, in passing by t he most challenging episode during t he crisis.
Along w it h improvement in global economy and financial market , t hose indicat ors have
move back t o t heir more normal level. The spread of JIBOR 1 mont h over BI Rat e, for
inst ance, has decline significant ly at around 15 bps. Yield of SUN has declined t o 10%-11%
for t he 10 years SUN and longer mat urit y. The CDS spread has also dropped t o below crisis
level of below 200 bps, close t o t he pre crisis level. M eanw hile, t he IDR exchange rat e has
also recovered and hover around 9,400 recent ly, despit e st ill at higher volat ilit y compare
t o t he pre crisis period.
How ever, t he policy t ransmission int o t he real sect or has been slow ing dow n as
uncert aint ies remain. The banks’ lending, needed t o support t he economic grow t h, is st ill
quit e slow . The year t o dat e banks’ lending grow t h up t o Sept ember 2009 is st ill below 5%.
In addit ion, t he lending rat e also does not decline as expect ed. Despit e t hat , t his is
sensible, in face w it h t he declining economic slow dow n and uncert aint y, but is also closely
linked w it h t he w ay banking implement risk management . For some ext ent , t his reflect s,
t hat t hey t end t o avoid risk rat her t han, properly ident ifying and manage risk accordingly.
We also observe t hat t he w ay financial invest ors globally, do not show any change in
t heir behavior, as mainly reflect ed in t he high volat ilit y of st ock market . They t end t o over
3
react on every single new s and dat a announcement , w hich indicat es t heir eagerness, t o t ry
t o recover t heir lost during t he crisis, and nervousness of pot ent ial lost . This behavior, is
pot ent ially t hreat ening t he sust aining economic recovery.
The risks and challenge ahead
There are now more signs of global economic recovery and improvement in t he
prospect of financial market . How ever it is st ill t oo early t o conclude, t hat t he recovery
pat h w ill be smoot h and sust ainable, since as I previously ment ion, t he lag of policy
t ransmission t end t o lengt hen and uncert aint y remains. In addit ion, issues concerning t he
implicat ion of ext raordinary measures, t hat has been t aken by major aut horit ies, such as
t he w idening of fiscal deficit in major count ries, and t he ‘exit policy’ of quant it at ive easing
t aken t o fight deflat ionary pressure in t hose count ries has st art ed t o emerge. To cope w it h
t his issue, aut horit ies have int ensified t heir policy communicat ion, t o convince t hat all
needed measures and t ools have been prepared. Yet , it seems t hat all of t hose are not
convincing enough, as at t his st age, t he polit ical involvement in every count ry t ends t o
increase.
Wit h t he above background, w e have t o keep opt imist , but st ill have t o be caut ious.
From t he risk management perspect ive, t he challenge in t he period ahead, is in ident ifying
t he pot ent ial risk appropriat ely, w hich is t he key in risk management . The recent
t urbulence has changed t he global economy and financial market landscape. Consequent ly
t he st andard indicat ors, bot h in financial market and real economic, might have also
changed, and w e cannot rely on t heir empirical behavior. In face w it h t his sit uat ion, w e all
have t o w iden t he indicat ors t o be considered, including qualit at ive indicat ors.
The recent development has also lead t he aut horit y, t o adjust and shift t heir
paradigm and approach in set t ing t he macroeconomic policy, and supervising as w ell as
regulat ing financial sect or. In addit ion, aut horit ies globally have been challenged, w it h a
more serious dilemma. On one side, t heir need t o maint ain sust ainable economic recovery
process, w hich means need t o be expansionary or accommodat ive. While on t he ot her
side, t hey need t o maint ain financial syst em st abilit y, mainly by st rengt hening regulat ion
and supervision and improve t he balance sheet st ruct ure of financial indust ry, banking in
part icular, and it s risk management as w ell as t o avoid t he pot ent ial inflat ion in t he
medium t o long t erm horizon. St riking t he opt imal balance bet w een t hese t w o sit uat ions
w ill be challenging and dynamic.
The sit uat ion w e have in Indonesia is considerably bet t er t han t hose faced by
developed count ries, but w e have t o alw ays be aw are, t hat w e are in an int egrat ed w orld,
and t hat t here is st ruct ural changes. Hence, more prone t o ext ernal shock. In t his regard,
Bank Indonesia alw ays commit , in achieving a balance bet w een financial st abilit y and
monet ary st abilit y, in order t o maint ain low and st able inflat ion needed t o safeguard a
healt hier and sust ainable economic grow t h.
The sit uat ion I just described, should alw ays be t aken int o account in conduct ing
business in a more challenging period ahead, more specifically in t he risk management
4
pract ice. For banking indust ries, considering t heir import ant role in t he economy, and t he
severe impact in t he societ y w hen t hey fail, I hope t here w ill be more professional, and
more proper implement at ion of risk management , and in part icular a more efficient asset
and liabilit ies management .
From t oday’s seminar, I hope w e w ill have a bet t er insight in risk management area
and a fruit ful discussion t o enhance our underst anding and more import ant ly t o increase
confidence in implement ing it .
THANK YOU.
Jakart a, 26 Oct ober 2009
5